Case 1 GE s Two Decade Transformation
1. How difficult a challenge did Welch face in 1981? How effectively did he take charge? When Reg Jones retired and Jack Welch became GE’s CEO in 1981, the country was facing a major recession, with high inflation and unemployment rates, reminiscent of those 50 years earlier during the Great Depression. Thousands of businesses were failing, not only affected by the national economic conditions but also due to increased competition from other countries such as Japan. At the time, GE was highly structured, with numerous management layers and several macro businesses. The company followed very orthodox practices, with 43 different strategic …show more content…
His rationale behind these strategies was to deliver both short-term profits and long-term organizational strength. Under his holistic leadership, he built a well-oil machine to deliver sustained competitive performance.
3. How does such a large, complex diversified conglomerate defy the critics and continue to grow so profitably? Have Welch’s various initiatives added value? If so, how?
Jack Welch built a culture at General Electric that came to appreciate and promote change. He once said: “We’ve long believed that when the rate of change inside an institution becomes slower than the rate of change outside, the end is in sight. The only question is when.” During his tenure, thousands of people were fired and several unprofitable businesses were eliminated; however, he transformed GE from a bureaucratic conglomerate into a lean and powerful company. Welch believed that every component of GE had to be profitable and contribute to the company’s overall productivity and success. Every single person, piece of equipment, division, and manager had to contribute to the bottom line. Productivity, efficiency, and profitability were expected in order to make the cut. Welch’s initiatives were designed to increase inventory turns, quality, productivity, and improve customer satisfaction. They yielded excellent results, making the company grow at a double-digit rate, and building more shareholder equity than any corporation in history.